Break-Even Analysis for Restaurants in the UK

When you know your break-even point inside and out, you can figure out how to give customers that value without running yourself into the ground. You'll know if you can afford to use higher-quality ingredients, whether that happy hour special actually makes sense, or if raising prices by a dollar will help or hurt. Instead of making those calls based on gut feeling or panic, you're making them based on what the numbers actually tell you about your business.

What is Break-Even Analysis?

Your break-even point is the moment where your total income equals your total fixed and variable costs — in other words, when your restaurant stops running at a loss and begins to generate profit.

Break-Even Formula (by customer volume)

Break-Even Point = Total Fixed Costs ÷ (Average Revenue Per Customer - Variable Cost Per Customer)

Alternative Formula (contribution margin)

Break-Even Point = Total Fixed Costs ÷ Contribution Margin Ratio

Where:

• Contribution Margin = Total Sales − Total Variable Costs

• Contribution Margin Ratio = Contribution Margin ÷ Total Sales

Why Does Break-Even Analysis Matter?

According to the Toast Voice of the Restaurant Industry in the UK, 78% of restaurateurs expect year-on-year growth, but cost management remains a top challenge. A break-even analysis gives you a clear view of how much you need to sell — or how many customers you need to serve — to cover your outgoings.

What Costs Should You Include?

Fixed Costs (these don’t vary with sales):

• Rent and utilities

• Internet and phone bills

• Licences and permits

• Equipment leases

• Insurance

• Marketing subscriptions

Variable Costs (these increase as sales increase):

• Ingredients and drinks

• Labour (hourly wages, service staff)

• Cleaning supplies and disposables

• Payment processing fees

Mixed Costs (part-fixed, part-variable):

• Electricity and water bills

• Certain staff roles with both salaried and variable components

A Quick Example

Let’s say your restaurant’s monthly costs are:

• Fixed costs: £66,666

• Variable costs: £60,000

• Total sales: £150,000

That gives you a contribution margin of £90,000 and a margin ratio of 0.6.

Using the formula:

Break-Even Point = £66,666 ÷ 0.6 = £111,110

If your average customer spends £45, then:

Break-Even Customers = £111,110 ÷ £45 ≈ 2,469

UK Consumer Context: Why It Matters Now

According to the Toast Consumer Preferences Survey 2025, in which 200 UK diners were surveyed about restaurant pricing and value, 78% say eating out has become too expensive to do regularly, and 29.5% say they’d be more understanding of restaurant pricing if they were aware of cost pressures like break-even points.

How to Use Break-Even Analysis to Make Better Decisions

1. Set Realistic Sales Goals

Target revenue based on your real costs, as well as the past sales data you have available, rather than guesswork.

2. Price for Profitability

Knowing your break-even point helps you design menus that actually make money — especially if you use recipe costing tools.

3. Improve Menu Engineering

Menu engineering is about strategically highlighting high-margin items and reducing emphasis on dishes that don’t pull their weight. Use EPOS sales data alongside plate cost insights to identify which items deliver value and which are dragging down profitability.

Strategies to Lower Your Break-Even Point

• Optimise labour: Consider digital scheduling tools and rota management

• Rework recipes: Use ingredient-level costing to boost margins

• Use EPOS insights: Identify slow movers and top profit drivers

• Monitor supplier prices: A 10% jump in poultry or dairy can erode your margins — track this proactively

Read how Le Bab used Toast’s KDS and EPOS to reduce table turn time to under 40 minutes at their Battersea location

Final Thoughts

Break-even analysis is more than a spreadsheet formula. It’s a way to take back control of your margins. Whether you’re adjusting your pricing, investing in tools, or deciding when to open a second site, knowing where the line between loss and profit lies will help you move with clarity and confidence.